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Pdfin Late August Library of Congress image det 4a32167, photo by William Henry Jackson (circa 1892). In �ate �ugust The Federal Reserve Bank of Kansas City’s Jackson Hole Economic Policy Symposium In �ate �ugust The Federal Reserve Bank of Kansas City’s Jackson Hole Economic Policy Symposium Published by the Public Affairs Department of the Federal Reserve Bank of Kansas City 1 Memorial Drive • Kansas City, MO 64198 Diane M. Raley, publisher Craig S. Hakkio, content advisor Kristina J. Young, associate publisher Lowell C. Jones, executive editor Tim Todd, co-author Bill Medley, co-author Casey McKinley, designer Cindy Edwards, archivist All rights reserved, Copyright © 2013 Federal Reserve Bank of Kansas City No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the publisher. First Edition, 2011 First Edition, Second Printing 2013 In Late August • III �ontents vii Introduction 1 ‘Monetary Policy Issues in the 1980s’ August 1982 • Grand Teton National Park, Wyo. 9 ‘World Agricultural Trade: The Potential for Growth’ May 1978 • Kansas City, Mo. 15 ‘Modeling Agriculture for Policy Analysis in the 1980s’ September 1981 • Vail, Colo. 23 ‘Price Stability and Public Policy’ August 1984 • Grand Teton National Park, Wyo. 29 ‘Central Banking Issues in Emerging Market-Oriented Economies’ August 1990 • Grand Teton National Park, Wyo. 37 ‘Maintaining Financial Stability in a Global Economy’ August 1997 • Grand Teton National Park, Wyo. 43 ‘The Greenspan Era: Lessons for the Future’ August 2005 • Grand Teton National Park, Wyo. 51 Afterword 57 Appendix 60 Images from the Jackson Hole Symposium 62 Jackson Hole Economic Symposium Team 63 Bibliography 66 Photo Credits 68 Index Contents • V 1). 98 © Ocean/CORBIS, photo by unknown photographer (1 unknown photo by © Ocean/CORBIS, Each year, participants from across the globe gather in Jackson Hole, Wyo., to discuss important policy issues of mutual interest. The area is one of America’s most beautiful national parks, and is located in the Tenth Federal Reserve District, which is served by the Federal Reserve Bank of Kansas City. Introduction For more than three decades, the Federal Reserve Bank of Kansas City has hosted the annual Economic Policy Symposium in Jackson Hole, Wyo. It is an honor for our Reserve Bank to be involved in organizing and facilitating a forum that brings together central bankers, private market participants, academics, policymakers and others to discuss the issues and challenges we hold in common. Removed from the day-to-day political and market pressures, this event takes place each year within the Kansas City Fed’s region. This site, which allows attendees to step back and challenge their assumptions, is a key component of the Symposium’s success. My predecessors, former Kansas City Fed presidents Roger Guffey and Tom Hoenig, contributed importantly to the Symposium’s reputation, yet understood, as I do, that the Symposium’s continued success is not the result of any single person or institution. We depend on a worldwide network of experts to plan each year’s event and to ensure the discussions that happen here remain candid and relevant. The Symposium’s reputation of excellence is due to the efforts of past participants, speakers and many others who have recognized an event like this cannot take place without widespread collaboration and input. Each year, we publish the results of this work in the form of proceedings on our website at www.KansasCityFed.org. There, you can find the papers, commentaries and discussions from past Symposiums, as well as more information about the event and its history. This short history of the Symposium, which was first published in 2011 to mark the 35th symposium, details the efforts of those who have been involved in various roles, but it would be impossible to highlight the work of everyone who has contributed in a meaningful way. It is my hope that this volume provides a glimpse into how a diverse and dedicated group of people has helped make the Symposium what it is today. We are sincerely grateful for their dedication, ideas and efforts through the years. In the following pages, you will find stories about these individuals and the place where they gather annually in late August. Esther L. George, President and CEO, Federal Reserve Bank of Kansas City Introduction • VII The town square of Jackson, Wyo., is framed by one of four massive arches constructed of elk antlers. byoneoffourmassive archesconstructed ofelkantlers. isframed Wyo., The townsquareofJackson, © Ric Ergenbright/CORBIS, photo by Ric Ergenbright (October 10, 1985). The U.S. Fish and Wildlife Service administers the National Elk Refuge nearby. ElkRefuge Service administers theNational Wildlife and Fish The U.S. “�onetary �olicy Issues in the 1980s” August 1982 • Grand Teton National Park, Wyoming “�e had a conference … in late �ugust, always in Jackson �ake �odge.” 1 -Roger Guffey , President, Federal Reserve Bank of Kansas City, 1976-91 There’s a small but very sharp bite in the air early on many August mornings in the Grand Tetons of northwestern Wyoming. It isn’t just a hint of autumn. It is something more—a promise that winter will follow soon and that it will be tough here. Go to the town square in Jackson, Wyo., to admire the four massive arches built from elk antlers on display and you’ll see streets lined with four-wheel-drive vehicles, many topped with ski racks or fronted by snow blades. Here, the winter changes how you live. Washington, D.C., in the summer is hot. It’s exactly what you’d expect for a city built along a river swamp in the south—not just the usual summer heat, but something that engulfs you. The mercury may go higher in other parts of the United States, but few places are more uncomfortable than Washington in the summer when the humidity tests 90 percent and the sun beats down. And then it does the same thing tomorrow. And then the day after that. There is no relief in the breeze here. When the wind blows, it almost always comes hot and from the south. Here, the summer manhandles you. In the summer of 1982, perhaps no one was battling more Washington heat than Federal Reserve Chairman Paul Volcker. A trip to the cool air of Wyoming that August had to offer the promise of some relief. 1. Interview with author, Aug. 28, 2008. Monetary Policy Issues • in the 1980s 1 Three years earlier, under Volcker’s leadership, the Federal Open Market Committee an- nounced that it would no longer implement monetary policy by targeting the federal funds rate, but would instead fight mounting inflation in the economy by concentrating on the money supply, leaving the markets to determine interest rates. As a result, in 1981 the federal funds rate touched a record high of 20 percent while inflation moved above 31 percent. This solution to the inflation problem was putting the economy into a recession, where Americans faced not only historically high bor- rowing costs and rising prices, but also double-digit unemployment rates. To no surprise, this battle against inflation left the Fed chairman fighting critics ). 985 1 from all sides, including a president 7, who had won the 1980 election in part on public dissatisfaction with how the economy had performed under his pre- decessor and a Congress that was weary of hearing from angry constituents. But if Volcker came to Wyoming in search of respite, either through a 1 (July Leighton Mark photo by © Bettmann/CORBIS, chance for a little of his beloved fly Under the leadership of then-Federal Reserve fishing or to enjoy the cool morning Chairman Paul Volcker, the FOMC took tough breeze at the Jackson Lake Lodge, he measures to successfully tame inflation. would find precious little relief at the symposium. This was not a vacation. • • • Economists, by nature or nurture, are like living and breathing versions of the Picasso paintings that show both sides of a solitary image. So well-known is their use of the phrase “on one hand … but on the other hand,” that President Harry Truman once famously asked for a one-armed economist to provide him with economic counsel. Put nearly 100 well-known economists in a room at a difficult and controversial period for the economy, make the topic “Monetary Policy Issues in the 1980s,” and they will have much to say. • Monetary Policy Issues • 2 in the 1980s 3 “Reflecting the reward structure in academia and sincere disagreements over the conduct of monetary policy, criticisms of Fed actions are in ample supply,” Penn State 2 University Economics Professor Raymond E. Lombra told symposium attendees. “More generally, there is little doubt that academic economists and monetary policymakers are frequently disappointed with one another.” Lombra’s comment came after a presentation by Edward J. Kane, an economist who was then at The Ohio State University, that included some especially strong comments about the Fed and, more directly, about Volcker’s leadership. “Depending on which economic indices one emphasizes and how one takes into account other potentially relevant developments, the (October 1979) change in FOMC policy framework can be portrayed as spectacularly successful, relatively unimportant or absolutely disastrous in its effects,” Kane said. In Kane’s view, it was the third option. The move had been a mistake. He then listed for symposium attendees the five macroeconomic developments that had occurred since the change in Fed procedure: 1. Higher interest rates and growth in substitutes for traditional forms of money; 2. Generally slower growth rates in the monetary base, M1, and real GNP; 3.
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